What we’ve learned so far from Elizabeth Holmes’ testimony

By Sara Ashley O’Brien, CNN Business

For 11 weeks, the only words from Elizabeth Holmes in her criminal trial came from old TV interviews, an audio recording of an investor call and text messages presented to the jury.

But over the course of two days this week, and a brief appearance the week prior, Holmes took the stand for roughly nine hours before a packed San Jose courtroom. She testified about the origin of Theranos, the evolution of its blood-testing devices and the positive feedback she claimed to have received along the way.

Holmes admitted to some of the prosecution’s most damning allegations while offering up alternative explanations. At times, she displayed some contrition. But throughout her testimony, she attempted to sow doubt that she had any intention to deceive — a key part of what federal prosecutors are seeking to prove. She also deflected responsibility onto others by simply naming who held certain roles at the company.

“The defense can benefit if it can undermine the government’s narrative that Holmes knew about and directed the alleged fraud at Theranos,” said Miriam Baer, a professor at Brooklyn Law School, told CNN Business.

For Holmes, 37, the stakes couldn’t be higher. Holmes faces 11 criminal fraud charges on allegations she knowingly misled investors, patients, and doctors about the capabilities of Theranos for financial gain. Holmes, who has pleaded not guilty, faces up to 20 years in prison and a fine of $250,000, plus restitution, for each count of wire fraud and each conspiracy count.

A Stanford University dropout, Holmes founded Theranos at age 19 with the lofty mission of revolutionizing blood testing and spent a decade working under the radar in its quest to do so. By 2013, the company claimed to have developed revolutionary blood testing technology that could accurately, reliably and efficiently conduct a range of tests using just a few drops of blood.

Holmes was hailed as a remarkable success story. She was lauded on magazine covers as the richest self-made woman and “the next Steve Jobs.” She raised $945 million from investors, once valuing the startup at $9 billion. Then it all began to unravel when a Wall Street Journal reporter started poking holes in the company’s claims.

Holmes is slated to resume testifying next week when court is back in session on Monday, Nov. 29 at 10 am local time. After her attorney is done questioning her, the prosecution will get its turn. Here’s what we’ve learned so far from her time on the witness stand.

Holmes personally added pharmaceutical logos to reports that investors testified misled them

In one of the most striking moments of her testimony so far, Holmes admitted she was the person who affixed logos from pharmaceutical companies Pfizer and Schering-Plough onto reports that Theranos prepared before circulating them.

Numerous investors and business partners have testified they believed the reports were from the pharmaceutical companies and indicated they had endorsed Theranos’ technology.

During its case, the government had tried and failed to pinpoint who at Theranos had added the logos to the reports. But on Tuesday, Holmes’ attorney Kevin Downey asked her in his deadpan questioning: “Who added the logos of those companies to the top of those documents?” Holmes testified: “I did.”

“This work was done in partnership with those companies, and I was trying to convey that,” Holmes said. She acknowledged that she had heard the earlier testimonies from witnesses who believed the reports were from the pharmaceutical companies. “I wish I had done it differently,” she testified.

Holmes acknowledges use of modified third-party devices

Holmes also confirmed the company used commercially-sold lab equipment to test patient samples and testified that Theranos withheld this information from many people, including at least one major retail partner.

While witness testimonies suggested Theranos’ leaned on third-party machines due to its technological failings, Holmes portrayed the decision as a response to accommodate a key retail partnership with Walgreens.

The retailer, she testified, had determined not to bring Theranos’ devices into its stores until the startup received regulatory approval. Theranos “agreed to do what Walgreens wanted,” she testified, and set up a central lab.

But Holmes said at a certain point, it became impractical for its proprietary devices — which she said were intended to be operated by “a layperson or a technician at a store” and process one sample at a time — to run tests in a central lab. For that reason, she said, Theranos “made inventions” on commercial lab equipment, altering them to process small amounts of blood.

That combination, Holmes testified, was considered a “trade secret.” As a result, Theranos didn’t tell many about its reliance on these machines, including Walgreens.

Holmes pinned the decision to withhold the information on her company’s lawyers. “This was an invention that we understood from our counsel we had to protect as a trade secret,” she said. “The big medical device companies like Siemens could easily reproduce what we had done if they knew what we were doing… And so the advice was to keep it confidential so that Theranos would have the chance to profit off of that invention.”

Holmes testified Theranos did disclose its use of the third-party devices to the US Food and Drug Administration as well as to board members. However, one of its high-profile board members, former Defense Secretary James Mattis, testified earlier in the trial he didn’t recall this detail coming up.

Holmes mentions a key name for the first time

After two days on the witness stand, Holmes finally mentioned the name “Sunny Balwani,” her ex-boyfriend who served as Theranos’ COO. Before the start of the trial, court documents indicated she might testify that she was the victim of a decade-long psychologically, emotionally and sexually abusive relationship with Balwani. These allegations, which Balwani’s attorneys have denied, are intended to speak to her state of mind at the time of the alleged fraud.

So far, Holmes hasn’t testified about the personal nature of their relationship at all.

Her first mention of him came as someone who was involved in the company’s negotiations with Walgreens. She then mentioned him several more times, including as being in charge of financial documents and projections. One of the ways in which the government has alleged Theranos misled investors was through false and misleading financial statements and models.

Balwani will face the same charges as Holmes when his trial gets underway next year. He has also pleaded not guilty.

Holmes’ charm and charisma on full display

For the first time, jurors got to see Holmes’ charisma — which helped convince investors, retail executives and talent to bet on the company — on full display.

Holmes, unmasked and with her head slightly tilted, engaged in strong eye contact with her attorney as he questioned her. She confidently and deliberately responded to his questions. At times, she offered a slight laugh, a smile and even a tidbit of information that might serve to humanize her to the jury. Asked Tuesday, for example, whether she knew the date that a particular investment closed, she testified: “I do know because it was my birthday. February 3rd of that year.”

On scheduled breaks, Holmes could be seen embracing friends and family members. Her mother, Noel, has been a constant in the courthouse since the start of the trial. Her partner, Billy Evans, is also frequently in attendance. A small group of unidentified others, who are apparent friends or family, has also been in the courtroom to witness her testimony.

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